Topic: Liable Pro Rata for Partnership Debts (Joint & Subsidiary)

Island Sales, Inc. vs. United Pioneers Gen. Const. Co.

No. L-22493. July 31, 1975
Concepcion Jr., J

Plaintiff-appellee:ISLAND SALES, INC.,

Defendants: UNITED PIONEERS GENERAL CONSTRUCTION COMPANY, ET. AL
Defendant-appellant: BENJAMIN C. DACO

Facts:
 Defendant company, United Pioneers General Construction, was a general partnership duly
registered in the Philippines.

 In April 1961, defendant company purchased from the plaintiff company, Island Sales Inc, a
motor vehicle on monthly installment basis, with the condition that failure to pay any of the said
installments would render the whole unpaid balance immediately due and demandable.

 The defendant company executed a promissory note for P 9,440, payable in 12 equal monthly
installments of P786.63 every 22nd day of the month.

 Defendant company failed to pay its July installment which led the plaintiff to sue the defendant
company for the unpaid balance amounting to P7,119.07.

 In the suit, defendant-appellant Daco and four other partners (Guizona, Sim, Lumauig, and
Palisoc) of the defendant company were included as co-defendants in their capacity as general
partners.

 Upon motion of the plaintiff, the complaint was dismissed insofar as defendant Lumauig is
concerned. When the case was called for hearing, the defendants and failed to appear despite
notices sent to them. Hence, the trial court declared the four defendants in default.

 The trial court decided against the partnership and the four partners, and ordered them to pay
plaintiff the unpaid balance with interest plus attorney’s fees and costs; with the understanding
that judgment will only be enforced against the partners only if the defendant company has no
more leviable properties with which to satisfy the judgement.

 Defendant Daco and Sim moved to reconsider the decision claiming that since there
are 5 general partners, the joint and subsidiary liability of each partner should not exceed 1/5 of
the obligations of the defendant company.

 The trial court denied the motion. Hence, the appeal.

Issue: Whether the dismissal of the complaint to favor one of the general partners of a partnership
increases the joint and subsidiary liability of each of the remaining partners for the
obligations of the partnership.
Ruling:
No.
Under Article 1816 of the NCC, the liability of the partners, including the industrial ones, to the
partnership’s creditor, is pro rata (joint) and subsidiary.
In the present case, there were 5 general partners and since their liability is pro rata (joint), each
partner is liable to only 1/5 of the partnership’s obligation to the plaintiff. The fact that the complaint
against Lumauig was dismissed, upon plaintiff’s motion, does not unmake Lumauig a general partner in
the defendant company.
Therefore, each partner is only liable to 1/5 of the partnership’s obligation and it will not increase
in view of the condonation of Lumauig’s liability.

Doctrine:
Condonation by creditor of share in partnerships debt of one partner does not increase pro
rata liability of other partners.